Are you looking for a dividend yield of up to 8%? Jefferies suggests buying two dividend stocks

Investors are always looking for high yields, and currently the signs are lined up in favor of the high yield dividend sector. Dividend payments ensure a regular income stream, regardless of market conditions, while high yields offer the potential for strong returns on investment.

the Dividend stocks They are also a favorite of defensive investors, and tend to be less volatile during market ups and downs. This is an important point right now – although the consensus wisdom is that we will see an economic soft landing, there is still a chance of an economic downturn.

This backdrop was helped by a recent note from Desh Piramoniteliki, head of micro strategy at investment bank Jefferies, who points to high-yield dividend stocks as sound options under today's conditions.

“After a challenging 2023, the outlook for dividend strategies has improved,” says the Jefferies team. “The Fed is increasingly leaning toward June being the first cut, suggesting that growth will become a bigger challenge than inflation. However, given the decline Sharp is unlikely, ultra-defensive bond proxies may continue to struggle. Instead, we find that high-quality yield is the best place to catch the cycle.

Jefferies' Omar Nakatha, a 5-star analyst ranked in the top 4% of Street stock professionals, followed this line of thinking with several specific picks – marking two high-yielding stocks as a buy, and options that should return Up to 8% profit return. We have used it TipRanks database To get a broader view of these stocks, I found that they have strong Buy consensus ratings. Details here

DHT Holdings (DHT)

We'll start with the oil tanker company, DHT Holdings. This company is one of the independent companies in the global ocean transportation sector, and it specializes in transporting crude oil. The name DHT is an abbreviation for “double hull conveyors”, a modern method of constructing conveyors designed to enhance safety and prevent leaks. The company is a pure-play operator of very large crude carriers (VLCCs), or “very large crude carriers,” which are huge tankers with tonnage ranging from 299,000 to 320,000 dry weight tons (DWT). These are the largest crude oil tankers cruising the oceans today.

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DHT's fleet of 28 VLCCs is wholly owned by the company and operated primarily on a charter basis. The prevalence of long-term leases in the company's operations model gives DHT a high level of reliable fixed income.

Fleet quality is a vital factor for ocean carrier companies, and DHT has a relatively small fleet. All but 4 of its ships were built in 2011 or later, with the 5 smallest vessels afloat built in 2018. The company's fleet includes a total of 28 VLCCs, including 4 tankers for which the company recently entered into construction agreements. These four ships will be built in South Korean shipyards and will have a gross deadweight weight of 320,000 dwt each. Each vessel has an average price of $128,500,000 and will be delivered in 2026.

In its most recent quarterly financial results, as of 4Q23, DHT reported a total of $94.5 million in adjusted net revenue, a total that was down 19% year over year but was $1 million better than expected. The company's earnings per share, in GAAP terms, came to 22 cents per share. This was 1 cent higher than expected – and it fully covered the company's recent earnings announcement.

The dividend of 22 cents per common share was announced alongside fourth-quarter results. This dividend payment represents an increase of 15.7% over the previous one and was sent to common shareholders on February 28. The annual payment of $0.88 per common share results in a yield of 8%.

Jefferies analyst Omar Nokta was impressed by the quality of DHT's vessels and operations, writing: “DHT is a pure VLCC shipowner with exposure to the spot market, with its environmental design and scrubber-equipped vessels positioned for potentially significant profits. We see stronger dynamics ahead for tankers.” , especially with increasing non-OPEC production volumes and the potential for additional OPEC+ exports. We expect shareholders to benefit from the dividend payout ratio of 100% of quarterly profits.

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Taking this forward, Nokta gives DHT a Buy rating, an upgrade from Hold, and a $14 price target that suggests a one-year upside potential of ~26%. (To view Nokta's record, click here)

Overall, the Strong Buy consensus rating for this stock is based on 4 recent analyst reviews, which are broken down into 3 Buys and 1 Hold. Shares are trading for $11.15, and the average price target of $13.43 suggests shares will gain about 20% over the next 12 months. (be seen DHT stock forecast)

Front line (back)

The next stock on Jefferies' list is Frontline, one of the world's largest tanker companies. Frontline carries crude oil and refined products and operates one of the largest and most modern fleets in the industry. The company has 86 vessels afloat, the oldest of which was built in 2009 and 20 vessels built in 2020 or later. The fleet consists of 43 VLCCs, the largest class of ocean-going tankers, and also includes 25 Suezmax vessels, with a capacity of 157,000 dwt and the largest that can transit the Suez Canal, in addition to 18 LR2/Aframax tankers, with a capacity of 110,000. resident.

Frontline has been in business since 1985 and has seen strong success in recent quarters. Revenues were up last year compared to the previous year, rising 27% from $1.44 billion in 2022 to $1.83 billion in 2023. The company's stock has also seen strong gains, up more than 60% in the past 12 months and nearly 17% during General. To go on a date.

As Q4 2023 passes, we can take a look at Frontline's revenue for the quarter. The company had $415 million on the top line, down 21% year over year and more than $5 million below expectations. On a better note, the company's adjusted earnings for the quarter, of $102.2 million, were 46 cents per share.

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This was more than enough to cover the common stock dividend, which was declared on February 28 for payment on March 27, at 37 cents per share. This announcement represents an increase of 23% from the previous quarter, and the annual dividend of $1.48 gives a yield of 6.4%. Frontline has a history of adjusting the dividend to keep it in line with current earnings.

In his coverage of Jefferies, the Nokta analyst was impressed by the company's ability to consistently maintain a high dividend payout ratio. He says of the stock: “Frontline is one of the world's largest crude oil tanker operators with a young fleet and high exposure to scrubbers. We see stronger dynamics ahead for tankers, especially with growing non-OPEC production volumes and the potential for additional OPEC+ exports. We expect dividends to remain Dividends are a key part of the Frontline story and we expect shareholders to benefit from the unofficial dividend payout ratio of 80% of quarterly earnings.

Looking ahead, Nokta gives this stock, like DHT above, an upgrade rating, from Hold to Buy. The price target here, set at $30, indicates a potential 30% one-year upside.

Overall, Frontline has 5 recent analyst reviews, including 4 Buys for 1 Hold, for a Strong Buy consensus rating from Street analysts. The stock's average price target of $28.61 and current trading price of $23.04 combined implies a one-year gain of 24%. (be seen FRO stock forecast)

To find good ideas for trading dividend stocks at attractive valuations, visit TipRanks Best stocks to buya tool that unifies all of TipRanks' equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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